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European car sales recovery vulnerable to slowing economy

European new car sales rose 6.2 per cent in October, extending their recent recovery as demand in previously recession-hit southern countries was boosted by buying incentive schemes.

PHOTO: REUTERS

[BERLIN] European new car sales rose 6.2 per cent in October, extending their recent recovery as demand in previously recession-hit southern countries was boosted by buying incentive schemes.

Sales rose in all major markets except France, highlighting that country's struggle to kick-start growth. But analysts warned signs of an economic slowdown across the region could snuff out a fragile car market revival in the coming months. "The recovery in the European auto market is mainly fuelled by catch-up effects in the (southern) crisis countries," said Peter Fuss, a partner and automotive specialist in Ernst & Young's German practice.

"It remains weak and susceptible to a renewed economic setback that today seems likely again." The International Monetary Fund warned last week that growth in the 18-nation euro area could be weaker than expected after the region's economy barely grew in the past two quarters, while unemployment remains locked at 11.5 per cent.

Passenger car registrations in the European Union (EU) and European Free Trade Area (EFTA) rose to 1.11 million vehicles last month from 1.05 million in October 2013, the Association of European Carmakers (ACEA) said on Tuesday.

Sales in Spain, Portugal and Greece - some of the hardest hit markets in the crisis - jumped by more than 20 per cent, as buying incentives from governments and carmakers helped to boost demand for Renault and VW brand cars, whose European deliveries rose 10.5 per cent and 4.5 per cent respectively.

Germany, Europe's biggest single car market, was up 3.7 per cent, while No.2 Britain jumped 14.2 per cent, helped by cheap credit and its stronger economic growth.

By contrast, third-placed France slipped 3.8 per cent.

Year-to-date deliveries in the EU plus EFTA region rose 5.9 per cent to 11.02 million vehicles from 10.41 million in the year-earlier period, ACEA said.

Volkswagen, Europe's biggest automaker, and PSA Peugeot Citroen saw deliveries rise 6.9 per cent and 1.1 per cent respectively, while luxury nameplates BMW and Daimler were up 9.4 per cent and 2.2 per cent.

The only major group to post lower sales in October was General Motors, with deliveries falling 5.1 per cent as the withdrawal of the Chevrolet brand from Europe outweighed a 12 per cent gain by its Opel brand.

George Galliers, London-based analyst at research group Evercore ISI, said a gloomy economic outlook was likely to hold back demand in the months ahead. "To see a step up, it would require improved economic activity, lower unemployment and higher business confidence levels," Mr Galliers said, predicting European car sales growth to slow to 3.5 per cent in 2015 from 4.2 per cent this year.